Is this the end for the country retreat?

City workers buying up second homes in the countryside are driving up rural property prices. This is leading to a serious lack of affordable housing. So what's the solution - construction of more houses, or a new tax on second home ownership?

If you live in the countryside, you may draw some comfort from a study that appeared in the British Journal of Psychiatry: it found that rural residents have slightly better mental health than non-rural ones. We can only assume that the study didn't examine those stressed out by the rural property market. According to the Halifax, the average house in rural areas costs 6.7 times average annual earnings, while property in urban areas cost 5.6 times local pay. In fact, the average home in rural areas cost £208,699, 19% more than the average price of £176,115 in towns or cities. And it doesn't look like it's the pastoralists among us driving the prices.

City workers, buoyed by bonuses of around £7.5 billion this year, are snapping up second homes in the countryside. According to the Royal Institute of Chartered Surveyors (RICS), the residential farmland market is at its strongest in two years, with 46% of it being bought up by non-farmer mortgage hunters. And buyers are looking far beyond the traditional commuter belt for a private, rural retreat, says Penny Churchill, a property correspondent with Country Life.

Indeed, north Cornwall, hardly a quick train ride from London, is now the least affordable rural local authority in the country. At £212,960, the average house is ten times local average earnings. South Hams in Devon was second, at 9.3 times local earnings. It's hardly a coincidence, therefore, that the southwest is the most visited area in Britain: 20.5million UK residents travelled there in 2004, against 16.6 million for its nearest rival, the southeast, says VisitBritain.

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But rural communities are beginning to stage a fight back. The Affordable Housing Commission last month released a report calling for the construction of 11,000 affordable houses per year in smaller towns and villages. Much more radical was its suggestion that a new tax on second homes should be imposed by the government to stem the "negative impact" of second homes in rural "'honeypot" areas. According to the chairwoman of the Commission, Elinor Goodman, if "we don't act now, more and more people will be priced out of the countryside leaving rural communities to increasingly become dormitories for the better off and places where people go to retire or for the weekend. This, in turn, will undermine the fabric of rural life."

That recommendation hasn't impressed the Tories. "There is clearly a problem with a lack of affordable housing in rural areas and across the country," says Caroline Spelman, shadow secretary of state for communities and local government. "But higher taxes and more regulation are not the answer," she told the BBC.

Some rural local authorities have already begun to act. Planners at the Lake District National Park have been granted permission to convert a three-storey building on condition that buyers are employed within a ten-mile radius or have lived in the surrounding parishes for more than three years. According to Lynne Greenwood in The Sunday Times, "similar restrictions are likely to become more common elsewhere in the country". That's hardly good news for the city worker looking for a rural idyll to put his feet up, but it might just maintain the sanity of his country cousin.

Jody Clarke

Jody studied at the University of Limerick and she has been a senior writer for MoneyWeek for more than 15 years. Jody is experienced in interviewing, for example in her time she has dug into the lives of an ex-M15 agent and quirky business owners who have made millions. Jody’s other areas of expertise include advice on funds, stocks and house prices.